modernization of payments and collections forde.pdf · • moip. mexico payments and bitcoin •...

Modernization of Payments and Collections

Josie Forde Market Management

Information Classification: Confidential 2

Traditional Challenges… End to End

Cost Timeliness Managing Payee

Information Risk Transparency Client

Experience

Millennials with New Expectations

2008 Financial Crisis

Fraud & Cyber Attacks

Globalization of Trade Flows

Advancing Technology

Growing Regulation

Growing Pressures on an Imperfect Payments System Market Forces…

Payments System


• Cumbersome, outdated infrastructure and technology

• Inefficient processes, in many cases the incremental result of compliance with new regulatory mandates over many years

• Processing costs

• Lack of transparency for payments, timing, and liquidity throughout end to end process

• Customer fees can be high and unpredictable

• Sub-optimal user experience

• Lack of speed, for most payment rails

Challenge—Friction in Payment Flows and Infrastructures

Traditional Challenges… End to End

Cost Timeliness Managing Payee

Information Risk Transparency Client

Experience


Opening the door to potential disruptors who promise a better client experience.

Note: All trademarks used are owned by their respective owners.


Fintechs are also active in Latin America…

Payments :

CrowdTransfer

CurrencyBird

Khipu

Flow

Masblu

Puntopagos

Chile Brazil

150 Fintechs :

• Vindi

• Foxbit

• MoIP

Mexico

Payments and bitcoin

• Volabit

• PagoFacil

• ComproPago

Enterprise financial management

• Facturama

• Reachcore

• Factigo


Blocktech in Financial Services Virtualscape Applications & Solutions

Source: http://startupmanagement.org/blog Note: All trademarks used are owned by their respective owners.


Blockchain Exploration at BNY Mellon Initiative Participants Objectives BNYM Role & Opportunities

BKoin

Internal Understand working of Bitcoin and blockchain to create an internal coin.

Use BKoin for blockchain awareness and education.

PTDL Group

(Post Trade Decentralized

Ledger Group)

London Stock Exchange

+ Financial

Institutions

Explore blockchain for Post Trade activities

BNY Mellon to participate in Business use-case group as well as Technology group.

R3 CEV

Distributed Ledger Group

40+ global Financial

Institutions

Create common standards and technology platform for blockchain-based solutions for financial services.

BNY Mellon to participate in identifying business use-cases and defining the technology architecture. Opportunity to access common standards, work with other Financial Institutions.

Ripple Ripple Labs Payments & Settlement improvements.

Opportunity to optimize cross-border payments.



Ripple Proof of Concept (POC)

• Ripple Connect Software – payment communications and quoting process • Ripple Ledger/Network – transaction settlement, ledger based on Blockchain tech • Modeling a cross-border low value payment use case

Test Environment Experimentation with Ripple Connect Software and Ripple Ledger/Network

• Greater straight through processing via up-front quoting process • Expedited payment settlement, near real-time • Lower processing costs • Improved payment status transparency and real-time liquidity monitoring • Certainty of end to end fees for clients

Potential benefits to confirm via the POC



BKoin: Executing Blockchain within BNY Mellon

• Internal application built using Bitcoin core • Allows exchange of “BKoins” between internal BNY Mellon users • Tracks user balances and transaction history using private blockchain • Uses private peer-to-peer network within BNY Mellon infrastructure

NEXEN is BNY Mellon’s new API driven ecosystem and portal for client interfaces with BNY Mellon platforms.


End to end cost Timeliness Transparency

Managing Payee

Banking Information

Settlement, Liquidity, &

Systemic Risk

Blockchain - Potential Benefits

-------------------Theoretical—To Be Validated----------------------

• Capable of recording movement of digital assets real-time.

• Public/private encryption key technology - difficult to hack without private keys.

• Encodes all transactions into blocks.

• Quick, global confirmation of transactions.

• Decentralized - no one place for cyber attack or failure.

• New product opportunities using a single messaging & settlement infrastructure.

• Open source – is it secure?

• AML/OFAC compliance?

• How much transactional data can be incorporated into a blockchain?

• Timetable for network effect?

• Difficulty of integration with existing platforms?

• Does long-term benefit justify short-term cost of integration and multiple infrastructures?

Potential Benefits Outstanding Questions


SWIFT Global Payments Innovation—Improving the speed and transparency of cross-border payments • Collaborative effort between SWIFT and 40+ global banks

• Aims to improve client’s correspondent banking experience by increasing speed, transparency and predictability of cross-border payments through: - Same day use of funds - Transparency and predictability of fees - End-to-end payments tracking - Transfer of rich payment information

• Initially targeting corporates for B2B payments

• Underlying technology will involve peer-to-peer messaging

-Blockchain and distributed ledger technology will be explored in the future

• Targeting a pilot by September 2016

• BNY Mellon intends to participate in the pilot for USD payments.

.


Global Payments Innovation – Ecosystem Vision

Source: SWIFT


End to end cost Timeliness Transparency

Managing Payee

Banking Information

Settlement Risk

SWIFT Global Payments Innovation Initiative—Benefits

• Greater efficiency in managing cross-border payment flows

• Improved ability for banks to provide SLAs and status updates for designated cross border payments

• Greater predictability of, and visibility into, payment delivery

• Increased speed

• Greater fee transparency


Payments on Behalf of (POBO) structure has been evolving…

• POBO : evolution towards greater centralization of cash management

Decentralized Payment Factory

Regional SSCs

In-house Bank (netting)

POBO/ROBO (single global hub)

POBO Process

• Business unit receives invoice, approves it and sends to Payment Factory

• Payment factory sends payment instruction to bank on behalf of business unit and sends a debit entry to the company’s in-house bank

• Bank executes the payment

• Company’s in-house bank debits the business unit’s internal account


Benefits and Challenges of POBO

Benefits

• More efficient working capital management

• Reduced costs: account maintenance, transaction fees

• Decreased cross border and FX payments, with better spreads

• Greater control and fraud prevention

• Better, consolidated view of supplier relationships

Challenges

• Local, complex tax implications

Differing regulations on non-resident accounts and non residents paying for local entities

• Many countries require Central Bank approval

Though more successful in Europe and Asia, POBO is encountering challenges in Latin America…


Teaming with disruptors

Collaborating within the industry

Expanding suite of solutions

Paym

ents

mod

erni

zatio

n BNY Mellon is modernizing our approach to payments to help clients overcome challenges


NEXEN is driven by five core components that are transforming how our services are developed and delivered. NEXEN creates a flexible environment where we can be responsive to clients’ needs.

Providing a foundation for clients and the industry to build upon NEXEN: New open source cloud-based platform

Platform BXP is a cloud-based platform that lowers our costs and delivers resilient, secure solutions that scale and accelerate time to market.

Digital Pulse Reports, predictive analytics and insights generated from the multitude of transactions at BNY Mellon.

APIs Application Program Interfaces (APIs) allow integration between BNY Mellon services and our clients’ solutions.

Gateway Integrated business solutions, capabilities and data delivered across all access devices.

App Store A virtual store offers enhanced customization and choice with best in-class apps from a wide range of providers.


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modernization of payments and collections forde.pdf · • moip. mexico payments and bitcoin •...

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